Here’s the problem, as I see it: Our attention – our focus – is not where it should be.

Michael Porter has said that no social program can rival the business sector when it comes to creating the jobs, wealth, and innovation that improve standards of living and social conditions over time. And yet so much of our focus is either on big business on the one hand, philanthropy and micro-finance on the other, that we essentially neglect – some of it’s benign, some not – that part of the business sector that is most productive, creates the most jobs, represents the fundamental drivers of our economy.

I’m talking about the missing middle. Those businesses that James Surowiecki described in The New Yorker as bigger than a fruit stand but smaller than a Fortune 1000 corporation. They have revenues between $1 million and $100 million, and are responsible for more than 60 percent of all jobs, making them absolutely essential to our economic prosperity.

Ironically, they are more or less ignored by traditional financial institutions and are barely on the radar of VCs or foundations. Sustained economic growth requires businesses like these that reach for scale. It requires that we invest in resources that help build and support them, and in so doing, provide momentum for job growth and wealth creation. And yet our tendency is to ignore these innovative, hard-working, persevering and profitable entrepreneurs, and we continue to do so at our collective risk.

I am extremely passionate about this, so much so that I founded Next Street, a merchant bank dedicated to providing advice and access to capital to urban-based, small and medium sized businesses. In fact, Next Street’s model represents a new enterprise for a new economy: a for-profit business focused on maximizing the growth, profitability and success of high-performing urban businesses. Our goal is nothing less than enhancing economic development, wealth and job creation and transforming the way that financial and business advisory services are provided in this market.

Our client businesses are often – but not always – minority or women owned. They’re creating real jobs, the kind of careers you can raise a family on, and improve standards of living that build up communities.

When I talk about this sector, I realize that it doesn’t have the inherent sexiness of a celebrity-backed charity or micro-finance project, or the obvious appeal for big banks or VCs. But in fact these businesses should be very appealing to all of these investor groups. Unfortunately, there exists a bias against these businesses that leads not only to neglect, but actual barriers to their growth. Whatever the root of this bias, it’s certainly not based on reason. And here’s why:

The majority of Next Street’s clients have been around an average of 18 years. They’ve weathered recessions and national catastrophes, and continue to open their doors each day. This says that their success isn’t fleeting.

These companies are typically smaller but more profitable than the average small business, and 50 percent less likely to default on their debt than the average small business, and one-third less likely than a large business.

And while minority-owned businesses grew twice as fast as all others during the last decade, bank loan denial rates are five to six times higher for ethnic-and minority-owned businesses, the majority of which are located in our cities. Five to six times more likely to be turned away. It makes no sense at all.

Some barriers are definitely attitudinal, such as misperceptions about the risk of investing in urban companies. Others are systemic, such as the dwindling availability of loans from the Small Business Administration.

But the major barriers are related to the changes in the banking world over the last 25 years: from consolidation, to the decline in relationship management, to loan practices designed for much larger businesses in order to facilitate economies of scale.

The large foundations have a critical role to play here but, for a variety of reasons, they haven’t stepped up. I have nothing against philanthropy, mind you. I sit on the boards of numerous not-for-profits. And here’s what I see: organizations view their grant-making and their endowment investing as mutually exclusive, with little if any effort toward coordinating foundation investments with their missions. In fact, foundation investments have sometimes worked against the goals supported by grants and programs.

As for microfinance, it can make tremendous differences in the lives of individuals. No question. But neither charity nor micro-finance can build economies. If we want to really accomplish things on a meaningful scale, we need to redirect our attention and reconsider where we direct our investments.

So from our point-of-view, we see big banks and venture capitalists over here; mission investing – as it’s currently practiced – and small-bore government and not-for-profit initiatives over here. In the middle is what we call the Imagination Gap because of the apparent failure of investors to see that here is where true opportunities lie.

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